What Is Student Loan Forbearance and How Does It Work?

Student loan forbearance provides a temporary pause or reduction in monthly student loan payments. This option is available for borrowers experiencing financial difficulty, allowing them to stabilize finances without the immediate burden of full loan obligations. Forbearance serves as a short-term solution, offering relief during challenging times. Borrowers should understand how this option functions and its potential effects on their overall loan repayment.

Understanding Forbearance and Eligibility

Student loan forbearance encompasses several types, each designed to address different circumstances. General forbearance, often referred to as discretionary, is granted at the loan servicer’s discretion. Mandatory forbearance must be granted by the servicer if a borrower meets specific criteria. Administrative forbearance is typically initiated by the Department of Education or a servicer due to specific programs or issues.

Eligibility for general forbearance involves temporary financial difficulties, medical expenses, or changes in employment. General forbearance is available for Direct Loans, Federal Family Education Loan (FFEL) Program loans, and Perkins Loans, usually granted for up to 12 months at a time, with a cumulative limit of three years over the loan’s life. Mandatory forbearance is available in specific situations, including:
Serving in AmeriCorps
Qualifying for the U.S. Department of Defense Student Loan Repayment Program
Participating in a medical or dental internship or residency
National Guard activation (if not eligible for military deferment)
Federal student loan payments constituting 20% or more of one’s gross monthly income
Performing teaching service that qualifies for teacher loan forgiveness

Requesting Forbearance

Before initiating a forbearance request, borrowers should gather all necessary information and documents. This includes identifying the specific type of forbearance and obtaining the corresponding form from the loan servicer’s website. Depending on the reason, borrowers might need to provide documentation such as proof of financial hardship, medical bills, or employment status changes. For instance, requesting forbearance due to financial difficulties may require income details or financial statements to illustrate the inability to make payments.

Once information and documents are prepared and the form is completed, the application process can begin. Borrowers can submit their request to their federal student loan servicer online, by mail, or via phone. Continue making regular payments until receiving confirmation that the forbearance request has been approved to avoid negative credit impact. After submission, borrowers should expect a confirmation receipt and be aware of typical processing timelines, maintaining open communication with their servicer.

Financial Implications During Forbearance

During student loan forbearance, interest generally continues to accrue on all types of federal student loans, including subsidized loans. This means that even though monthly payments are paused or reduced, the total amount owed can increase over time. For example, a $30,000 loan at a 6% interest rate could accrue $1,800 in interest over a one-year forbearance period.

A significant financial consequence is interest capitalization, where unpaid accrued interest is added to the principal loan balance at the end of the forbearance period. This increases the principal amount, leading to higher future monthly payments and a greater total cost over the loan’s life. For most federal loans, accrued interest will capitalize after forbearance, though some Direct Loans may be exceptions. Paying the accruing interest during forbearance can prevent the loan balance and future monthly payments from increasing.

Returning to Repayment

As the forbearance period approaches its end, the loan servicer will typically notify the borrower, providing details about the new payment amount and the upcoming due date. This notification helps borrowers prepare for the resumption of their regular loan obligations. It is important to resume making payments as scheduled to maintain good standing with the loan servicer.

If a borrower finds they are still unable to afford payments as forbearance ends, other options exist. Borrowers should contact their loan servicer to discuss alternatives such as income-driven repayment plans or other deferment options, if eligible. A detailed discussion of these options falls outside the scope of forbearance.